ZIMPLOW Limited, one of Zimbabwe’s biggest agricultural, mining and infrastructure equipment suppliers, said last week profitability climbed by 88% during the year ended December 31, 2021, tracking a 55% growth in revenue. Our Senior Business Reporter Melody Chikono (MC) spoke to Vimbayi Nyakudya (VN) the firm’s Chief Executive Officer for a review of the past year, and what this year holds for the listed firm. Below are the excerpts of the interview;
MC: What were the key drivers of your performance?
VN: The group experienced a 55% growth in revenue and a 88% growth in operating profitability in inflation adjusted terms. In the agricultural cluster, key performance drivers included enhanced confidence, the availability of stock within our branches and the provision of customer centric and exceptional product support across the country. These factors culminated in a 48% increase in tractor volumes and 56% increase in tractor drawn implements. In addition, the group strengthened access to regional export markets leading to a growth in export implements and spares volumes by 44% and 75% respectively. In the mining cluster, the group benefited from the government funded Emergency Road Rehabilitation Programme (ERRP), which translated into an increase in earth-moving equipment sales by 58%. In addition, there was an upsurge in production for deployment to major mining houses for purposes of boosting fleet maintenance. The introduction of new products by CT Bolts propelled the business unit’s volumes and/or sales by 48%. Across the group, the revamped model for parts procurement brought forth the desired results in terms of our workshops becoming extremely competitive. Furthermore, there is now added impetus on driving growth in parts sales and service hours for all relevant units. In terms of the logistics and automotive cluster, Scanlink drove performance with parts sales increasing by 107% and service hours by 4%. This is attributable to increased confidence by customers. Improvements in stock availability propelled volumes growth for Trentyre across the Passenger Car Radial (PCR) tyres (58% growth), Truck, Bus and Radial (TBR) tyres (23% growth) and Off the Road (OTR) tyres (116% growth). The factory utilisation stood at 74%.
Fact file: Vimbayi Nyakudya- He is an agriculture, mining and construction equipment specialist.
- Has over 18 years of experience spanning the agriculture, mining and manufacturing sectors, and now currently focused on the distribution and industrial engineering of industrial products and equipment.
- He is a holder of a Master of Business Leadership and is a Chartered Accountant (Zimbabwe).
- His interests include marketing brands as well as research programs targeted at the expansion of the agriculture, mining, infrastructure and manufacturing sectors in Zimbabwe.
MC: Tell us about the big picture.
VN: The group concentrated on growth throughout 2021 by implementing various initiatives, such as raising finance to support the business and a focus on demand management. In addition, there was an emphasis on completion of the acquisition and integration of Scanlink and Trentyre and this was successfully concluded. The group also focussed on proactively addressing supply chain constraints specifically affecting our business units, due to the adverse effect of Covid-19. This was done through engagement with our original equipment manufacturers (OEMs). Management channelled efforts towards the replacement of key capital equipment within our factories and facelift/refurbishment of branches. Attention was also channelled to enhancing human capital resources, that is, building the right teams and aligning the organisational structure to group strategy.
MC: What has been your contribution to economic growth?
VN: Zimplow contributes significantly to agricultural output and mineral wealth extraction. Our machinery and equipment are operating across Zimbabwe’s mines, plantations and estates. Zimplow serves a whole range of customers, from commercial entities right through to the smallest subsistence farmer. In 2021, Zimplow, through Farmec, supplied the highest number of tractors across the country since 2001. These machines are of a premium nature. There are improved productivity levels and a lower cost of ownership to the farmer due to less downtime and servicing costs. This coupled with our vast network of workshops, means customers are assured of efficient, reliable and agile after-sales services. For small-scale farmers, we provide all required animal-drawn tillage equipment, and also we fully are supporting the Pfumvudza concept. We are the biggest large-scale producer of animal-drawn implements in Southern Africa. For mining, we provide solutions from earth moving equipment right through to the tinest bolt that keeps it all together. We have been the machinery provider of choice for major mining houses for years. In addition, we provide world-class product support to them. Our logistics cluster also contributed to the growth of the agriculture and mining sectors as evidenced by the growth of output moved from field or mines to market.
MC: What can you say about your capacity to meet demand in these areas?
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VN: We remain steadfast in our ability to meet demand, despite the global effects of Covid-19 and the ongoing Ukraine-Russia geopolitical conflict. Our business units have continued on a growth trajectory over the past years due to the ability of management and the board to navigate the different challenges. In terms of tractors and tractor-drawn implements, the group is in constant engagement with suppliers to maintain positive and mutually beneficial relationships. Despite acute foreign currency shortages, we are confident that the group will be able to meet its order book throughout the year. In terms of animal-drawn implements, we are continuing with replacement of key capital equipment at our factories to improve efficiencies and increase production. With regards to the mining industry, with the need to replace the Caterpillar distributorship following the termination of the agreement on 30 September 2022. We are confident that the capacity built over the years in terms of goodwill and trust, will enable us to reset the mining and infrastructure cluster.
MC: You have indicated that you have been on a drive to replace capital equipment. How much have you pumped into this project and what is the outlook?
VN: During FY2021, Zimplow invested US$2,8 million towards the replacement of capital equipment to improve factory efficiencies and throughout via our workshops. The investment into factory upgrades in particular has allowed the group to mitigate against supply chain distortions. The other upside has been the ability to manufacture new, innovative and efficient ground-engaging implements which have been introduced into our markets in FY2021, some of which take into account the critical aspect of the environmental stewardship on our part. The reception of these new products from our markets has been overwhelmingly positive, indicating the scope of revenue growth realisation in future periods.
The increased efficiencies from these factory upgrades, also are expected to significantly reduce waste. This will in turn have a positive impact on our margins going forward.
MC: You also indicated that your complete acquisition of Scanlink and Trentyre has been key to business performance. How much have these units contributed?
VN: The acquisition of Scanlink and Trentyre was completed in the second half of FY2021 and these subsequently formed the group’s logistics and automotive cluster. Since their acquisition, the thrust of the group has been to realign the subsidiaries’ business models to unlock the synergies. This entailed staff and supply chain reorganisation which yielded a 3% revenue growth and 100% profitability growth in the cluster as a whole. The group is heavily encouraged by this performance as it was underpinned by growth in all revenue segments. In turn, for the past six months wherein the two entities have operated under the Zimplow banner, Scanlink and Trentyre were able to contribute 11% and 8% to group revenue and profitability respectively in real terms.
MC: You haven’t been spared by foreign currency shortages. How have you manoeuvred around this stumbling block?
VN: True, this has been a national challenge wherein most companies have been adversely affected exchange rate volatility and the delay in processing of successful forex auction bids. The group remains encouraged by the interventions of the Government of Zimbabwe around the cocktail of measures to resolve these foreign currency bottlenecks that are currently plaguing the country. We are grateful for the engagements and assistance we have received from our bankers and the Reserve Bank of Zimbabwe. We constantly engaging to seek support on that front. Furthermore, in light of the multi-currency economy currently obtaining in the country, customer sales as well as export sales by Mealie Brand, across the Southern Africa region have greatly boosted the group’s foreign currency resource base.
MC: What is your outlook in this financial year?
VN: The group continues to strengthen its capability and capacity to respond to changes in the operating environment. This is key in order to deliver superior value to our shareholders.
The group is confident that it will still deliver a good performance in the 2022 financial year despite headwinds the group is currently facing.
